In 2003, California Senator Martha Escutia introduced a bill to make “technical nonsubstantive changes” to a provision of the California Civil Code dealing with construction defects. The bill passed out of the Senate and the Assembly without attracting a single vote of opposition.
However, a funny thing happened on the bill’s journey downstairs to the Governor’s office – it was called back. The author then gutted and amended the bill (see my discussion of gutting and amending in this post from last July). As amended, the bill authorizes the imposition of civil penalties of up to $1 million on issuers (as defined in the Sarbanes-Oxley Act of 2002) that fail to report specified misconduct to the Attorney General (or other appropriate government agency) and the issuer’s shareholders. Cal. Corp. Code § 2207. I discussed this new requirement at some length in an article that I wrote for the May, 2004 issue of Insights: “California Legislature Tells Sarbanes-Oxley Issuers to Confess or Else”.
Please see full publication below for more information.
